Canada Pension Plan Is Being Tweaked

There are a few changes in the works that could improve your benefits.

By Katrina Caruso

This past December, Canada’s finance ministers met to discuss the Canada Pension Plan (CPP) and decided on some changes that will help parents and those with a disability.

Canadians who take time off from the workforce to raise children or because of a disability will be able to receive benefits for years when they weren’t working (instead of simply having those years not count in the calculation of their benefit).

For those who stop working for a time to raise a child under 7 years old, the new formula will use the average income from the preceding five years in the workforce before the time off occurred. Those with disabilities will see their benefits calculated using 70% of the average income over the six years in the workforce preceding the disability, for the duration of the time that they’re not working.

All Canadians will now be able to receive survivor benefits in the event of death of a spouse or common-law partner, with no conditions related to age (previously, there were reductions for those under 45), surviving dependents, or disabilities. Those Canadians who had previously applied, and been denied, survivor benefits will be able to reapply once the changes take effect in 2019 (these amendments still have to be passed through legislation).

On a person’s death, the survivor benefits will be a lump sum of $2,500 paid in one payment, rather than an amount calculated using the deceased person’s income. This is good news for those with low-incomes.

According to the government, these changes won’t require any increase in contributions towards CPP.